GlobalTranz Enterprises LLC Assigned 'B-' Issuer Credit Rating, Outlook Stable; New Debt Rated

  • Private-equity firm Providence Equity Partners announced that it intends to acquire GlobalTranz Enterprises LLC from the Jordan Co.
  • GlobalTranz will finance the acquisition with a $465 million first-lien credit facility (comprising a $75 million revolving credit facility due 2024, a $310 million term loan due 2026, and an $80 million delayed draw term loan due 2026), an $85 million second-lien term loan (unrated), and an equity contribution from Providence.
  • We are assigning our 'B-' issuer credit rating to GlobalTranz.
  • At the same time, we are assigning our 'B-' issue-level rating and '3' recovery rating (rounded estimate: 55%) to the company's proposed $310 million first-lien term loan and $75 million revolving credit facility.
  • The stable outlook reflects our expectation that GlobalTranz will successfully integrate its recent acquisitions and benefit from organic growth while its leverage remains elevated over the next 12 months.
NEW YORK (S&P Global Ratings) April 16, 2019--S&P Global Ratings today took 
the rating actions listed above. We expect GlobalTranz's credit metrics to 
remain elevated over the next 12 months. We forecast that the company's 
debt-to-EBITDA metric will be in the high-8x area in 2019 due, in part, to 
acquisition-related expenses that we expect the company to incur. GlobalTranz 
has pursued an acquisitive growth strategy in recent years and has completed 
approximately nine acquisitions since the beginning of 2017. We expect the 
company to continue to purchase smaller third-party logistics firms and agents 
that currently sell its services. Therefore, we assume that it will use the 
$80 million delayed draw term loan to finance its acquisitions over the next 
two years.

The stable outlook on GlobalTranz reflects our belief that it will benefit 
from continued strong demand for freight transportation in the U.S. over the 
next 12 months and increased usage of transportation management systems to 
manage shipments. We also expect the company to continue to pursue 
acquisitions of both agents and other third-party logistics providers. 
Therefore, we anticipate that its leverage will remain elevated as incremental 
debt partially offsets its increased earnings, with debt to EBITDA improving 
to the high-6x area in 2020 from the high-8x area in 2019. We also forecast 
that GlobalTranz's funds from operations (FFO) to debt will increase to the 
high-single-digit percent area from the mid-single-digit percent area over the 
same period.

Although unlikely, we could lower our ratings on GlobalTranz over the next 12 
months if we believe the company's capital structure will not be sustainable 
over the long term. This could occur if the company is more aggressive than we 
expect in pursuing debt-financed acquisitions or if its liquidity deteriorates 
due to weaker-than-expected operating results.

Although unlikely, we could raise our ratings on GlobalTranz over the next 12 
months if the company reports better-than-expected operating results. This 
could occur because of lower-than-expected acquisition-related expenses or 
improved customer pricing. To raise our rating, the company would need to 
improve its debt to EBITDA below 6.5x on a sustained basis, and we would need 
to expect that the company's sponsor would remain supportive of this leverage 
level.

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